As reported by one manufacturer, making the move from a direct to an independent manufacturers’ representative sales force is hardly as easy as flipping the light switch on a wall. According to the manufacturer who made that move seven years ago, there’s a good deal of preparation that goes into the change.
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“Here’s the process we went through,” he continued. “First of all, the preparation for such a switch from direct to independent agencies should actually begin even before the final decision is made. It’s commonly maintained that a major reason for using agencies is that they reduce a manufacturer’s fixed sales overhead to zero. In other words, it doesn’t cost you anything until a sale is made and then the only cost is the commission. (We’ll save for another time and place the conversation for the need to consider shared territorial sales costs when there’s no existing business in a territory and pioneering work is needed.)
“But saving money should hardly be the major consideration. What should drive the decision is the answer to the question: Who can do the job of selling better — the direct or independent sales force? Once the answer is given — and in our case it was in favor of using reps, then all of our personnel who would be involved in working with reps were given a voice in our decision-making process.
“By everyone I mean clerical personnel all the way up to our higher-level managers who would be working directly with the agencies. This was done on our part to guarantee a ‘buy-in’ on the part of all who would be in regular contact working with our reps.”
That subject of “buy-in” was emphasized by the manufacturer, who continued: “It’s critically important that the entire management team of our company be committed to the rep way of conducting business. For instance, if the sales manager, who more times than not will just be there for a couple of years, has been instructed by his superiors to sign on reps, then what’s his level of commitment? Will that sales manager be an ally for the reps when the time comes? That’s why up and down the line all personnel have to be communicated to that reps are a valuable component of our company’s sales and marketing efforts.”
The manufacturer went on to describe steps taken to handle the actual transition from direct to independent sales staff, but his major point was the need to plan and execute the move in an efficient manner. “It might seem like a lot of work to make such a move, but the fact is everyone in our organization had to be ready for the move. But our experience showed that since we planned well, we were ready to hit the ground running once we made the switch.”
Evaluating the Move From Direct to Independent Sales
Completely separate from the previous manufacturer, another supplier recently offered a report card evaluating his company’s performance in the marketplace once they had made the move from a direct to an independent manufacturers’ representative sales network.
According to the manufacturer, “From the very beginning, the combination of all of our reps’ talents clearly became evident. Their in-depth knowledge of the territory, local contacts and relationships coupled with their flexibility in the field immediately improved our market performance.”
Not stopping there, the manufacturer continued: “Then, there’s the issue of line synergy. The agencies we chose to go to market with had line cards that clearly complemented our products. What that resulted in was a feeling that we were getting much more time in front of the customers than we did with our direct sales force.”
“In the end we came away with the feeling that the majority of our reps provided penetration at a much higher level within our customers’ corporate framework than we were enjoying previously.
Starting Off on the Right Foot
Here’s how one manufacturer describes the beginning of its relationship with a new agency: “Over the more than three decades that we’ve been working almost exclusively with reps, we’ve been able to create a fairly comprehensive list of things we automatically provide them. In addition, however, when we’re taking those first few steps with a new agency, we’re always sure to ask this question: ‘Here’s everything we think you’ll need from us, but is there anything else missing that we should provide that will make your job easier?’
“Our experience has been that usually everything they want/need is on the list. But occasionally a new agent will ask for something that I think all of our present agents can benefit from. When that happens, the new agent gets all the credit and the team gets whatever it is that the new agent suggested. It’s all about communications and teamwork and it’s worked well for us and our reps.”
How Much Influence Is Too Much?
A manufacturer that was fairly new to working with independent agents posed a question about how much he should do in order to direct his independent outsourced sales force. In other words, were there any ground rules concerning how much control the manufacturer should have over an agency?
“We made the move to reps about 18 months ago for a number of reasons, not the least of which were to improve our sales and naturally to save some money on the sales process. Since we had a long history of working with direct sales, one of our first concerns was how much influence we could exert when it came to directing our rep sales network. Internally we found there was no simple answer to this question. As a result, we opened the lines of communication with the reps we had contracted with and they provided us with what has proven to be valuable feedback.
“One of the first things we heard from a rep was that it’s up to the manufacturer to clearly define what an agency sells — not how he sells it. He went on to say that in the past manufacturers who have sought to control how they did their job didn’t last very long. On the other hand, it’s the manufacturers who seek to make reps a valued part of their corporate family that wind up being their best principals.
“I know our history with reps is still pretty limited, but the philosophy we’re employing is one that calls for us to acknowledge whether a rep is doing a good job for us or not. If it’s the former, then I’d say they can operate pretty much in whatever manner they want. If, on the other hand, their performance doesn’t measure up to our mutually agreed upon expectations, then perhaps it’s time to make a change.”
Anticipating the Tough Questions
Independent manufacturers’ representatives often wait for late in the interview process with a prospective principal before they pose the tough questions. One manufacturer let us know he’s more than prepared to discuss anything, but he doesn’t really want to wait for the agent to raise the subject.
“If we’re genuinely interested in a specific agency and believe there’s a real future in the two of us working together, we’ll anticipate his concerns and put them on the table first. For instance, consider subjects such as post-termination compensation, house accounts or payment for pioneering work. We’d be less than honest with a rep if we shied away from or talked around these subjects. That’s why early on, we’ll ask the rep what his level of concern is with these and other subjects. Then we’ll put all our cards on the table and come to an agreement. We’ve done this for years and the reps we’ve wound up working with have all turned into top performers for us. Why? Because we’ve been honest with each other from the very beginning and nothing’s changed over the time of our relationship.”
Keeping Manufacturers in the Loop
When the owner of an agency brought us up to date on his ongoing and nearly complete succession plan — which included selling the agency to his son — he stressed one point that ought to be of particular interest to manufacturers. “From day one, I’ve made it a point to keep all my principals informed concerning my transition/succession plans. I’ve been in business for more than three decades and for the past 13 years my son has been an integral part of the organization. That’s why it made so much sense for me to turn over the agency to him. But in addition to making sense to me, it also has made sense to my principals. That’s why I’ve let them know what my plans have been. Owing principally to my proactive approach in letting my principals know what the future holds, they were all in agreement with me. Not a single one of them has considered making a change.
“I mention this only because I think it’s incumbent upon manufacturers to communicate to their reps how important it is for them to share important information about the inner workings of their agencies. No one wants to be surprised or otherwise left in the dark when there’s something important in the offing.”
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